Friday, July 12, 2013

Moscovici Wants to Modify the Financial Transactions Tax

Back in the depths of the financial crisis, it was impossible to say anything too harsh about banks and bankers. The old idea of a "Tobin tax" on financial transactions--long a favorite of the Altermondialistes--was revived, and it seemed that everyone supported it, except of course the bankers. President Sarkozy certainly did. After tough negotiations and a public funk by David Cameron, which resulted in Britain's exclusion from the plan, France agreed with Germany, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia, and Slovenia on the parameters of the new tax.

But now the minister of finance, Pierre Moscovici, who serves at the pleasure of a president famous for saying "I hate the rich," has expressed concern, echoing the concern of associations of French industrialists, bankers, insurers, and brokers, that the new tax will "destroy a significant part of French financial activity."

I haven't seen the details of the tax, so I will reserve judgment as to the substance. Among other things, the proposal may be amended to exclude transactions involving sovereign bonds, in order not to add to state borrowing costs--not necessarily a bad idea. But does this regulation also cover derivatives based on sovereign debt? After all, one of the purposes of the financial transactions tax (FTT) was to curb the overly creative use of derivatives that seemed to propagate risk invisibly, thus contributing to the financial debacle.

As to the politics, however, Moscovici's approach seems totally wrong-headed. Why wait until the deal is almost done to express concern? Perhaps an FTT is not the best way to enhance the transparency of risk, but if that is Moscovici's worry, he ought to say so. The tax almost certainly will not prevent "sudden stops" in international capital flows, which surely did lead to the collapse of some European banks and widen the crisis. On the other hand, the revenue generated will compensate governments for the support they gave their banks in a moment of dire need.

What is needed from Moscovici is a clear statement of the principles on which a left-wing government intends to base its decision in a matter like this. These principles must be more than merely technical. They must include a statement that the privatization of financial profits is incompatible with the socialization of losses. If we are in this together, then the duties on both sides need to be clearly enunciated in terms other than market efficiency. By appearing to back the private sector's arguments, which are based solely on a refusal to bear the costs of damage done by private banks, Moscovici risks confirming the fears of those who believe that the government he represents is a captive of interests other than the public interest.

For comparison's sake, see Paul Starr's article on the failures of US banking reform efforts.

NY Times Vacations in France

It must be summer when the New York Times starts running articles on France every day of the week. The paper's reporters and columnists know how to enjoy themselves by writing about French malaise, starting with Maureen Dowd, who invented a quote from Camus to bolster her case. Today finds not one but two pieces, one on sullen consumers avoiding the Clignancourt flea market, the other a column by the inevitable and ineffable Roger Cohen in which he cites another column he wrote 16 years ago, which also found the French to be morose, hence, he concludes, French moroseness is a "myth," but a useful one, always available to be illustrated by profiling an in-law's gruff uncle.

The kernel of the "sullen France" story is always that the French are ingrates. Blessed with natural and created beauty, glücklich wie Gott im Frankreich, they nevertheless insist, so we are told, on stewing in an existential funk. Why is it that none of these junketing journalists ever reports on the theater festival in Avignon, the opera in Orange, the skateboarders at Trocadero, or the sunbathers on Paris Plage? Frankly, I'd rather be morose in France than forced to watch the George Zimmerman trial nonstop on CNN.